Indeed, the Covid-19 pandemic not only took a massive toll on human life and the economy, it also facilitated a wave of fraudulent behavior with individuals and businesses illegitimately claiming, by some estimates, over $200 billion in Economic Injury Disaster and Paycheck Protection Program loans, in addition to a staggering $45 billion in pandemic unemployment benefits.
The US Department of Justice, alongside other federal agencies, are working tirelessly to prosecute those who manipulated the pandemic assistance programs, paralleled by an equally aggressive effort to recoup the outstanding sums. Tools of civil action, such as the False Claims Act, are being leveraged to foothold meaningful outcomes with less resource allocation compared to criminal proceedings.
Of the $1.2 trillion in EIDL and PPP loans dispersed by the Small Business Administration, an alarming 17% are suspected to have been distributed to potentially fraudulent recipients. To highlight the scale of this issue, even deceased individuals have been identified as recipients of pandemic support with $38 million being potentially obtained under false pretenses.
Traditional investigative techniques are being deployed alongside advanced data analytics to identify and bring down larger fraudulent operations. Furthermore, the civil division of the Department of Justice has joined forces with local offices to identify and apprehend local-level fraud.
The potential recoveries from civil proceedings are significant, estimated to exceed $1 billion. These civil actions also have a lower burden of proof, often leading to negotiated repayment plans and the potential to award double or even treble damages under the False Claims Act.
However, time remains a critical element as actions under the False Claims Act must be launched within extended timelines from the discovery of the fraudulent act. A key concern is the current statute of limitations on recovery of unlawfully obtained pandemic unemployment benefits, which unless changes are made, will limit the recoverable window to three years. The current situation underscores the unpreparedness of the government in managing a crisis of such magnitude and the imperative importance of fraud deterrent mechanisms for future large scale crises.
For greater insight into the matter, read the full article by Christine Adams of Adams, Duerk and Kamenstein, a boutique firm in Los Angeles, at Bloomberg Law.